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The Statute of Limitations and 4 Options for Old Debt

Money Girl explains what the statute of limitations is on debt, and details 4 options to help handle your old, unpaid debts.

By
Laura Adams, MBA
7-minute read
Episode #398

Option #3: Make a Debt Partial Payment

If your financial situation has changed for the better, you may decide to begin making payments on an old debt.

Again, remember that in some states, paying any amount of a time-barred debt restarts a brand new statute of limitations period. That means you give up your legal protection, because the collector would be able to sue you in order to recover the full amount of debt.

Your credit report will always indicate that a debt became delinquent or went into collections, even if you begin making payments. However, once you pay it off and the account status shows “paid” your credit has a chance to improve.

Option #4: Pay Nothing on the Debt

If you don’t pay a debt, you still owe it even after the statute of limitations expires or it falls off your credit reports. That means a collector can continue to contact you indefinitely to try to collect it, even if they can’t sue you.

Having an unpaid debt on your credit report is obviously very bad for your credit. It can make it difficult or more expensive to get new credit, insurance, certain utilities, or to rent an apartment.

See also: 5 Ways to Get a Loan With Bad Credit

So what I want you to take away from this episode is that you need to consider both the statute of limitations and your credit when deciding how to handle debt. Also, understand how easy it could be to inadvertently revive an old debt and give a creditor much more time to file a lawsuit against you.

For these reasons, I encourage to you get legal help so you can consider all your options for unpaid debt and make the best decision for your financial future.  

More Resources:

Chart: Statutes of Limitations in All 50 States

Complete List of Statute of Limitations by State

Federal Trade Commission - Fair Debt Collection 

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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlersbook is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.